Is oil the key to PNG’s

minerals wealth?

In the wake of the trouble over Ok Tedi gold and copper mine, and with the outlook for world metal prices less than promis ing, there might be an air of pessimism about the future of countries like Papua New Guinea which are very heavily dependent upon their mineral resources. However, geologists believe that PNG has a dark ace in the hole.

“The big possibilities for big money in PNG are in oil,” says Bill McGee, of Nord Resources, one of the exploration com panies deeply involved in the development of the country. ’’They are starting to find oil.

Lots of gas has been found already; it has been around for a long time. ’’But now, with this Juha field, and others, they are star ting to get on to oil and oil is worth a lot more money than gas. The PNG government is now calling for tenders for some prospects on the Papuan side and the possibilities look really good,” he said.

But PNG is not the only country in the Pacific Ocean where oil prospecting has been under way in recent years.

Fiji prospects

Fiji has been the scene of intermittent exploration since 1969 and in 1980-82 two shal low and five deep wells were drilled, all of which were re ported as dry, says a report recently published by the Fiji Ministry of Lands, Energy and Mineral Resources.

These early disappointments have not stopped further ex ploration and four licences, covering about 16,000 sq km, have been negotiated.

This represents about half the shallow-water area which geologists regard as having pos sible prospective worth. The government is also involved with three deep-water pros pects which are thought to have long-term potential and pos sible connections into shallow

marginal areas.

Fiji, and some of the other island nations, are all of similar geology and most of them, with the partial exception of Fiji, and the notable exclusion of PNG, have yet to have more than cursory examination by geolog ists.

“Didn’t see it"

As Bill McGee, an experi enced PNG field geologist, says: “It depends on what you are looking for. Ken Raeder (of Niugini Mining), found the Lihir gold deposit after a number of prospectors had gone over the ground without seeing the real ly big lode. Everyone knew gold was there, but they we ren’t looking for gold, they were out for copper, and they did not see that the gold was there in commercial quantities. ’’Peter McNab found the gold on Simberi (another island in the Tabar group, the general chain of which Lihir is so far the richest), after they farmed in on us at Tabar,” Bill said. ’’They started getting good gold there, and so they started prospecting down the other islands in the group. ’’All these things depend upon what you are looking for.

If you don’t find it, you go somewhere else. Then, some while later, someone else will come back to the area looking for another mineral, and have success. Tabar is the classic example of this. CRA was into the area in 1965; BHP in 1971.

They were both looking for copper. They walked all over the ground where the gold is, but they weren’t interested.

Back in those days gold was US$35 an ounce, and 5 gm/ tonne gold just doesn’t fly at that price. Now it is US$3OO an ounce and it’s a different story. ”

The other area fascinating to prospectors is West Irian but, given the difficult political situa tion there, it is likely to remain for some time the treasure

somewhere over the rainbow.

Some geological work was done there in the 19705, said Bill McGee. ’’The place is obviously prospective for gold and copper; it is a continuation of the same geology as PNG.

Nickel and cobalt deposits are known to be there. But, so far as I know, nobody is working there at the moment. Maybe the companies are reluctant to get into areas of very high political risk, or maybe the Indonesian government is not issuing work permits. ”A couple of years ago there were some BMR geologists working in the territory, and one of the Australians was kidnapped. So BMR pulled out.

They felt they could spend their money at less risk elsewhere. ’’Why go there when, if you are determined to go to Indone sia, you can go to Sulewesi, or Java, or Sumatra, and still have excellent prospects? ’’But West Irian is attractive to a lot of people,” he said, ”if only because there is a lot of blue sky there that nobody has looked at, and you could trip over the big one that every prospector dreams about. On the other hand, even an El Dorado isn’t much good if someone is going to shoot you.”

By contrast with West Irian, most exploration companies find the PNG government very good to deal with. Most of the mining companies dislike the additional profits tax recently slapped on them, not so much because of the impost, but because the concept of it rank les. The Ok Tedi affair probably made some investors more cau tious, but overall it does not seem to have damaged PNG’s international image as a host and partner to geological ex plorers.

As go

as Aust.

’’Overall,” said McGee, ”1 think none of us who work

there regard the political risks as any worse than Australia.”

What was left unsaid, but which is very much in the minds of Australian mining developers, is the political risk of aboriginal land rights which, some com panies maintain, has seriously damaged exploration in Austra lia.

Melanesian land ownership did provide problems in such areas as Bougainville, but this now seems to have changed and, in general, geologists say, the Pacific is realistic in both political and environmental terms. Solomon Islands has some hang-ups, they say,and West Irian is well out of bounds but otherwise the picture is good.’’Prospecting today com es down to the attitudes of the island governments,” McGee said. ”If the government is keen enough they can facilitate the bureaucratic processes and also influence the people to accept the explorers. ’’Today we have to go in with a government permit. It’s all lines on maps and we don’t get claim-jumping and things like that. Modern methods can cov er a lot of territory very quickly, so we need quite large areas which require government con cessions to justify the large investments involved. Also, ulti mately, all the minerals belong to ‘the crown’ or the state in these places ... even if you find them, you don’t own them. It is ultimately the government’s right to dispense them by way of leases. When the mineral is mined the state takes royalties, taxes, additional profits tax, company tax ... a whole string of things. They say that on average, around the world these days, governments take about 75 per cent of a miner’s proceeds. But the governments have to do it cooperatively. If it isn’t worthwhile to the miner, he is first not to go into a project. The miner needs to know that he is going to get his costs covered, and make the size of profit he needs.”

Garry Barker